How can I sandbox kids web activity on computers?

Spence's kids are just getting into using a computer under Windows 7 and he wants to sandbox them so they don't screw up his computer or buy something without his knowledge. She accidentally bought an upgrade his Google Wallet for $300!

Leo says that Lifehacker has a great article on sanboxing kids' activity on the web. The chatroom says that there's a linux for kids called QIMO 4 Kids that may also work.